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Is America Movil (AMX) Looking to Expand in Argentina?

As per a recent report by NextTV Latam, Mexican telecom behemoth America Movil SABAMX is eyeing Argentina as its new growth area. The report stated that America Movil’s owner Carlos Slim recently had a meeting with the Argentine president Mauricio Macri to assess investment opportunities in Argentina’s state-owned telecom operator Arsat and Buenos Aires-based cable company TeleCentro.

The deal, if it materializes, may see America Movil acquiring a stake in Refefo Federal Fibre-Optic Network as well as on the Arsat-2 satellite. Notably, America Movil already has a footprint in Argentina’s telecom market through its Claro and Telmex Argentina subsidiaries. However, the company is barred from providing pay-TV services under the provisions of the Broadcast Media and Telecommunications Law.

America Movil is facing intense competitive pressure in Mexico. In 2014, the government of Mexico had introduced reforms within its telecommunications sector. The country’s telecom regulator, the Federal Telecommunications Institute (IFT), seeks to restrict the maximum hold of a company in the market to 50%. However, America Movil currently controls an enviable market share of nearly 68%. Another existing operator -- Telefonica S.A. TEF -- holds nearly 20% share in the market.

As part of these reforms, the IFT has banned America Movil from charging national roaming fees. Further, the company will have to share its infrastructure with other operators, particularly in the local loop (last mileage) segment. In Nov 2015, the company received the IFT’s approval regarding prices that it can charge as interconnection fees.

Also, in November, America Movil spun-off its wireless tower division in a strategic move to restrict its market share within the 50% limit imposed by the IFT. The company may also divest some non-core wireless and fixed-line assets in the future in order to comply with regulatory norms.

In 2015, U.S. telecom behemoth AT&T Inc. T forayed into the Mexican telecom industry with the acquisition of Grupo Iusacell and Nextel de Mexico. Since its entry, AT&T has been gradually expanding its 4G LTE wireless networks in Mexico. Currently, this service is available across 12 Mexican cities. It covered 40 million people by the end of 2015 and will be available to 75 million by the end of 2016.

Furthermore, AT&T aims to provide 4G LTE mobile Internet service to 100 million Mexican customers by the end of 2018. Management has decided to invest $3 billion toward the expansion of high-speed mobile Internet network in the country. In addition, Mexican cable MSO (multi service operator) Grupo Televisa S.A. TV has received a go-ahead from the IFT to enter the wireless space. However, the company is yet to take any decision in this regard.

We believe America Movil’s expansion drive in Argentina and other international markets is fuelled by the increasing competitive pressure in its homeland. America Movil currently holds a Zacks Rank #5 (Strong Sell).